An
article published in Washington Times,
a right-wing conservative daily founded and supported by a christian religious
group, informed its readers about islamic banking in Turkey. The article is
written by its correspondent Nicholas Birch.
Full content of the article is as follows:
‘Turkey is missing out on an opportunity to profit from Arab oil wealth as
tensions between its secular government and religious authorities prevent it
from issuing interest-free Islamic bonds that have become popular throughout the
Muslim world.
Government ministers had promised to push legislation through parliament during
this legislative year. But with lawmakers now on vacation until September, the
future of the measure is not clear.
Islamic bonds would have offered investors a cut of the cash flow of projects
financed by the bonds, thereby avoiding the interest payments on conventional
bonds that are in breach of Islamic practice.
Banking analyst "aduman Okumu" blamed the delay on the nature of Islamic finance
in this staunchly secular Muslim country. "Those who say money has no color
don't know Turkey," she said.
For a country that set its heart on Western modernity 150 years ago, trade here
is heavily weighted westward, with about 70 percent of exports going to European
Union countries.
Just as Turkey's founders saw the Middle East as a morass of religious
ignorance, so some Turks today tend to see investment from their Muslim
neighbors as a potential Islamic threat to their secular system.
This issue of so-called "green capital" surfaced again last week with secular
opposition politicians renewing calls for the firing of a businessman and close
aide of the Turkish prime minister.
In the 1990s, Cüneyt Zapsu was in partnership with a Saudi millionaire who
Washington now thinks had financial links to al Qaeda.
Opponents of the government also have called on the state banking watchdog to
seize accounts of the Turkish interest-free bank Zapsu, which reportedly have
been used to transfer money.
It is hardly an atmosphere conducive to Islamic banking, which remains marginal
in Turkey two decades after its introduction.
Worth about $300 billion worldwide, it makes up barely 3 percent of Turkey's
banking sector, compared with more than 10 percent in Malaysia and 22 percent in
Kuwait.
Although analysts say Turkish religious pragmatism has a lot to do with the
disparity, interest-free banks were not fully accepted into the banking
community until last year.
"We used to pay taxes three times higher than normal banks," says Ünal Kabaca,
head of interest-free Bank Asya.
Even today, interest-free banks go by the deliberately neutral name of
participation banks to sidestep restrictions on the public use of Islam in
Turkey.
Islamic banks are not unlike old-fashioned savings and loans in the United
States, in which depositors owned shares of the S&L and received dividends from
the institution's earnings.
Similar restrictions have slowed drafting of the bond bill. Elsewhere, Islamic
banks' investment decisions are vetted by religious authorities for their
compliance with Islamic law. In Turkey, such a procedure would be
unconstitutional.
Despite the slow pace of banking reforms, capital has begun to flow into Turkey,
with the last year's largest privatization, the $6.5 billion payout for Turkey's
state telecommunications company, won by a Saudi-run consortium.
A Gulf company is also behind plans to build two skyscrapers in central
Istanbul.
"Turkey has always been an important market for Gulf investors," says Adnan
Youssef, chief executive officer of Al Baraka, a Bahrain-based bank. "But in the
past only the big players invested. Now everybody is interested."
Islamic bonds would offer small investors the opportunity to participate as
well.
Passing bond legislation is "common sense, nothing more," says one senior
Turkish banker. "Turkey may continue to make easy money off Europe, but more
diversity means more profit."’g